Recent new mutual fund rules announced by Sebi

Sebi, has recently announced a slew of measures for mutual funds industry. The market regulator has modified certain mutual funds rules to make them more investor friendly. The recent announcement of new ‘flexi cap category’ under equity schemes has cheered up investors who were cautious about their investments in multi cap funds due to the change in portfolio allocation rules announced by Sebi in September.

The markets regulator has introduced a ‘flexi-cap category’ for mutual funds, which will be required to invest at least 65% of the corpus in equity but will have no restrictions on investing in large-, mid- or small-cap company stocks.

Earlier in September, Sebi announced to tweak the asset allocation rules for multi cap funds. According to the circular, a multi cap fund must invest a minimum of 75% in equity and equity related instruments with a minimum 25% allocation to large-, mid- and small-cap stocks.

The existing equity schemes will be able to reclassify themselves under the new category and continue to run their multi cap funds in the same manner without any change in portfolio allocation or investment process, just by changing the scheme’s name.

Sebi has restored the pre-covid cut-off timings of mutual funds, effective November 9. In April, Sebi had reduced the cut-off timings of all mutual funds to 1 pm from 3 pm and for liquid and overnight schemes to 12.30 pm from 1.30 pm.

On October 19, Sebi had restored the cut-off timings to 3 pm for all schemes except for debt schemes and conservative hybrid schemes.

Now, the cut-off time has been brought back to 3 pm for debt and conservative hybrid funds as well. The cut-off time for purchase of liquid and overnight funds would stand restored from 12.30 pm to 1.30 pm. The redemption cut-off time for equity, debt and liquid funds would stand restored to 3 pm. The Sebi action follows an RBI move extending debt market timings for most securities to 3.30 pm, also with effect from 9 November.

Sebi in a circular issued on November 5, doubled the foreign investment limit per mutual fund house to $600 million, from the existing $300 million. $50 million would be reserved for each mutual fund individually, within the overall industry limit of US $ 7 billion.